August 30, 2023
1. What is the current outlook for cryptocurrencies in LATAM?
The adoption of cryptocurrencies in LATAM is on the rise. Argentina, Mexico, and Brazil lead the adoption in the region.
However, the regulation of cryptocurrencies in LATAM is not uniform. By way of example, some countries have expressly regulated (e.g., Mexico, Brazil, and Chile), others are in the process of adopting new regulations (e.g., Colombia), and others remain unregulated (e.g., Argentina).
Mexico: The Mexican Fintech Law governs the provision of Fintech services. In matters of crypto assets, institutions offering services in connection with such assets must be authorized by the Bank of Mexico (Banxico).
Brazil: In December 2022, Brazil enacted Law No. 14,478, which regulates crypto assets and the provision of virtual asset services. This law differentiates between virtual assets (crypto assets) and national currency, foreign exchange, and electronic money and imposes a series of requirements for providing services related to virtual assets.
Colombia: A bill of law is currently being discussed in Colombia to regulate cryptocurrency exchanges and to establish minimum requirements for operating exchanges.
Argentina: Recently, the Central Bank of Argentina limited the supply and sale of cryptocurrencies and prohibited certain activities involving digital wallets. The prohibition does not affect cryptocurrency exchanges. In addition, traditional banks are prohibited from offering cryptocurrencies.
2. The Law in Chile
Law 21,521, known as the Fintech Law, went into effect on February 3, 2023. The Fintech Law promotes competition and financial inclusion through innovation and technology in providing financial services.
Also, on February 3, 2023, the Financial Market Commission (“CMF“) published the first two regulations related to the Fintech Law: General Rules no. 493 and 494, which regulate the registration process for financial service providers in the register and the request for authorization to provide investment advisory services.
The Fintech Law creates a regulatory framework for Fintech companies providing services related to the securities market and crowdfunding platforms, and establishes the groundwork for an open finance system in the financial industry.
One of the significant innovations of the Fintech Law is to define crypto assets as a “digital representation of units of value, goods or services, except money, either in local currency or foreign currency, which can be transferred, stored or exchanged digitally.” These assets are considered financial instruments, so their intermediation is regulated.
In addition, the Fintech Law defines and regulates an alternative transaction system platform, which includes crypto exchanges, defined as “a physical or virtual venue for quoting, offering or trading financial instruments or publicly offered securities.”
3. Has Chile contemplated the issuance of a CBDC?
On May 11, 2023, the Central Bank of Chile presented a report analyzing the benefits, risks, and challenges associated with a retail CBDC.
The report defines retail CBDCs as “digital financial assets issued by a central bank that the general public can use in their digital transactions.” In other words, it is a form of digital money that constitutes a liability for the CCBh.
Among the benefits indicated are the greater incidence of the monetary authority in the evolution of the Chilean payment system; promotion of competition and innovation; reduction of the risk of currency massification; and integration of cross-border payments.
On the other hand, the risks foreseen by the Central Bank are the possible impact on performance of the financial market; a closer relationship between the institution and the general public; the lack of a technological solution to operating off-line; and the high costs and time required to develop it.
The report concludes that the Chilean payment system functions adequately, adapting well to current challenges. The Central Bank plans to continue further research concerning the potential for a CBDC.
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